Forex Scams: Report a Forex Trading Scam

The word “forex scam” refers to any strategy intended to defraud traders by deception, such as convincing investors of great returns by trading on the currency market. In short, the foreign exchange market is a zero-sum game in which one person gains and another loses.

We’ve all heard that online investments are dangerous. This is especially true in foreign exchange. There are a lot of forex scams online, started by scammers who get confidence from the anonymity of the Internet. It is important to distinguish a scam from an actual forex trading activity in order to protect yourself from financial devastation.

How Does Forex Trading Work?

Forex trading, often known as FX trading, takes advantage of currency exchange rate swings. “The FX market does not decide the exact value of a currency, but rather the value of one currency compared to another,” explains Robert Johnson, a finance professor at Creighton University’s Heider College of Business. “In the FX market, you can take a position in practically any major currency against another major currency.”

For example, you could wager on the US dollar vs. the Japanese yen. Or the Japanese yen versus the Mexican peso.

While multinational corporations use forex markets to hedge natural positions, individual investors occasionally speculate on currency movements.

If you do decide to enter the world of forex, you will need a forex brokerage account. The problem is that not all forex brokers have your best interests in mind. In order to be on the safer side, a company like FundsTrace will be your best bet.

Is Forex Trading a Scam?

While forex appears to be legal, “there are many potential bad actors in the space, and it is a prime environment for spoofing, ghosting, and/or front-running,” according to Braden Perry, a regulatory and government investigations attorney with Kennyhertz Perry LLC in Kansas City, Missouri.

According to Perry, the rise of internet-based trading platforms has only compounded the risks by providing additional potential for fraudulent promotional schemes, overstatement of returns, and inability to pay out for victories. “Furthermore, certain actors are rigging the system with manipulative software.”

The fundamental problem with forex trading is a lack of transparency and opaque regulatory systems with inadequate control. However, there are currency products available on exchanges that are regulated. Similarly, there are legitimate brokers that do business in the market.

How to Recognize and Avoid Forex Scams

Some of the most common forex scams to be aware of are:

• Spoofing also known as ghosting. When a trader manipulates the market by placing a massive order that he or she does not intend to execute, the trader creates the appearance of interest in the position.
• Front-running. When a broker, anticipating a large order from a client, places an order for the broker’s own account ahead of the client’s.
• Sellers of signals In exchange for a fee, firms or traders promise to find buy or sell signs that indicate an opportune moment to make a transaction.
• Scams involving robots The promise of making automated forex transactions with a trading programme, sometimes known as a “robot.”

The most crucial thing you can do to avoid forex frauds, according to Perry, is to examine the underlying broker.

The best way to avoid forex frauds is to use the services of a company like FundsTrace, a market intelligence platform that assists users with portfolio and trading decisions on stocks, exchange-traded funds, mutual funds, forex, and cryptocurrencies, is to ensure a company is registered with the Securities and Exchange Commission.

“Forex trading is secure if you choose the right brokerage account and firm,” adds Savastiouk.

He advises putting money in and taking money out of brokers to see how accessible they are. He also believes it is a real issue if you are unable to contact your broker and speak with a representative.

Second, analyze the firm’s country affiliation and location. “Better regulations are seen in more developed countries,” says Savastiouk. “It is far better to choose a brokerage firm from the United States, Canada, Europe, or a few Asian countries. You should be concerned about everything else.”

Key Takeaways! 

To prevent being a victim of a foreign exchange trading scam, it is recommended that you work with a regulated broker who has a well-established reputation, a flawless track record, and favorable feedback from previous and existing investors. While the draw of immediate profits is difficult to resist, it is preferable to err on the side of caution and conduct a complete vetting procedure.

If you do decide to enter the world of forex, you will need a forex brokerage account. The problem is that not all forex brokers have your best interests in mind. In order to be on the safer side, a company like FundsTrace will be your best bet.

“Forex trading is secure if you choose the right brokerage account and firm,” adds Savastiouk.

He advises putting money in and taking money out of brokers to see how accessible they are. He also believes it is a real issue if you are unable to contact your broker and speak with a representative.